A British steel company is planning a merger as half-yearly figures show an increasing squeeze on costs has caused a drop in profits.
Despite the merge, due to reduced demand for the group’s products, manufacturing will continue at the group’s two existing plants at Bolton and Dalton in Yorkshire. The group expects Severfield-Watson Structures to become the largest structural steelwork company in Europe.
Severfield-Rowen said the operations at two of its other companies, Fisher Engineering and Atlas Ward Structures, would go on as normal.
The company made the changes public today as it released its half yearly results, with the group’s underlying profit slide from £4m in 2011 to £2.3m this year.
Severfield-Rowan has encountered challenges in the UK as demand for construction continues to fall. The company produce a wide range of steelwork packages, including the manufacture of steel sections and plate girders, and the demand for these services has fallen as confidence has remained low.
The group have had some success in London with the construction boost provided by the 2012 Olympic Games as 5,500 tonnes of its steel trusses were used to build the International Broadcast Centre and the main press centre at the Stratford London 2012 Olympic site.
Chief executive Tom Haughey said that falling demand in the construction centre and commodity price rises were ever-present challenges. “Despite the backdrop, the UK order book remains stable at £218m, which maintains full activity at all UK plants into 2013 and suggests further growth in market share.”
He went on to say that the demand outlook for the UK, with the exception of London commercial, industrial, warehousing and some energy sectors, remains stagnant.
Mr Haughey expects the merging of the three companies to be complete by the end of the year.
Mr Haughey noted that margins in the UK are coming under pressure again as clients and the supply chain push much harder to compete in a shrinking market. He stated: “Competitors in our sector remain under significant pressure, reflected in many cases by loss-making financial returns which are not sustainable and further rationalisation is expected in the industry.”
Haughey added: “Political policy direction on UK energy would be a helpful stimulus to UK construction but the potential projects pipeline of £465m in the UK remains sufficient for our needs in 2013.”
The group is investing £7m in its facility in Vidyanagar, India, alongside its partner JSW Steel. It hopes that their joint venture company, JSW Severfield Structures, will offset poor sales in the UK during the second half of the year.